Sigma Healthcare: Undervalued Growth Leveraging Operating Scale, Private Label Expansion, and International Pharmacy Opportunities

Sigma Healthcare Ltd (S5YA) has received a new Buy rating, initiated by Goldman Sachs analyst, Peter Marks.

Peter Marks has given his Buy rating due to a combination of factors that, in his view, the market is not fully appreciating. He expects Sigma Healthcare’s EBIT-to-network sales margin to improve materially over FY25–28, well ahead of current consensus, driven by stronger operating leverage from its wholesale distribution scale and its franchise model. He also anticipates a meaningful boost to profitability from higher-margin private label products, drawing on the successful playbook he observed at Clicks Group in South Africa, where Sigma’s current CEO previously held senior leadership roles. In addition, he sees New Zealand as a significant profit growth driver through new store openings, like-for-like sales gains, and the integration of wholesaling activities, even if this slightly dampens the overall group margin profile.

Peter Marks also views the current valuation as attractive relative to Sigma’s growth and defensive characteristics, despite it trading on a seemingly elevated FY27 P/E multiple. He argues that the company operates in a structurally favorable retail pharmacy segment that is both fragmented and resilient, with Sigma already regarded as one of Australia’s preferred pharmacy retailers. Early traction in newer markets such as New Zealand and Ireland provides further upside potential and validates management’s international expansion strategy. On this basis, his DCF-derived price target implies meaningful share price appreciation from current levels, supporting his Buy recommendation.